Purporting to remove subsidy on refined petroleum products and deregulate the downstream sector of Nigeria’s petroleum and gas industry, President Muhammadu Buhari’s administration has recently increased the pump price of petrol from 145 naira to about 162 naira per litre, the second significant increase in four years, following a similar price hike from 87 naira to 145 in 2016.
Going forward, the people of Nigeria, a major oil producing country in the world are now to pay for the refined petroleum products they consume at home at a rate to be determined by the price of crude oil in the international market.
By this latest decision to remove subsidy from petrol and raise the price arbitrarily, President Buhari has shattered whatever was left unbroken in the ruling APC’s promise of ‘’change’’ in the last five years of his administration.
With about 2 million barrels per day production capacity, Nigeria is the 15th largest oil producer in the world and currently the first in Africa.
Beginning from 1957, when oil was first discovered in commercial quantity in the Niger Delta region, Nigeria made modest but steady progress as an emerging oil and gas power house within the first three decades as an oil producer.
Between 1965 and 1989, Nigeria rapidly expanded its oil and gas value chain enabling infrastructure with the establishment of four refineries linked to 19 depots and pump stations through a massive network of 3000 kilometres of pipelines across the country.
This level of infrastructural development in its oil and gas industry at the time, though not adequate enough, nevertheless enabled Nigeria to substantially maximise the gains of a major oil producing country.
The challenges of the inadequacy of Nigeria’s modest effort at oil and gas value chain enabling infrastructural development will become aggravated and more manifest in the next three decades between 1990 and 2020 as a result of acute leadership failure, gross mismanagement and grand corruption in the Nigerian state.
Nowhere has the leadership failure, mismanagement and corruption of the Nigerian government manifested itself more in Nigeria’s oil and gas industry than in its inability to refine adequate petrol for the domestic consumption of its citizens.
Between 1990 and 1999, successive military regimes in Nigeria invested very little or nothing in the expansion of Nigeria’s oil and gas value chain enabling infrastructure to meet the emerging challenges of a growing population’s energy needs.
No new refineries were built and just as the turnaround maintenance of two in Port Harcourt one each in Warri and Kaduna, with combined refining capacity of 455,000 barrels of crude oil per day gulped billions of naira, the desired result was not achieved.
With refineries not working at their full installed capacities, the government resorted to importation of refined products to augment the short fall in domestic supply. As though in acknowledgement of its fundamental responsibility of providing energy security for its citizens, the government of Nigeria introduced a subsidy regime on imported petroleum products in order to reduce the financial burden of the consequences of their incompetence on the Nigerian people.
By 1999 when Nigeria transited from military to civil democratic rule, guided by a clique of ‘’Washington Consensus’’ Ideologues, the ruling PDP in their sixteen years in government washed their hands off the means of economic production under the pretext of ‘’government has no business in business’’ and transferred some of the most fundamental responsibility of government to the organized private sector.
Through its privatization, commercialization and liberalization policies, previous PDP administrations opted for a deregulated downstream sector and removal of all forms of subsidies on refined products, sale of critical national oil and gas infrastructure such as refineries to private entities and invitation to investors to establish private refineries that were guaranteed a pricing regime in Nigeria that will be determined by international price of crude oil.
However, the attempt to implement this toxic policy was stoutly resisted by Nigerians, the organized labour led by former NLC President and now a chieftain of the ruling APC, Adams Oshiomhole and a coalition of opposition parties and Civil Societies Organization led by former opposition leader and current President of Nigeria, Muhammadu Buhari.
Unfortunately, while the former PDP administrations grudgingly continued to pay subsidies on imported refined petroleum products, they neglected Nigeria’s refineries and allowed them to rot away while waiting for private sector investors to come and take up their responsibilities of providing energy security for its citizens.
In the absence of adequate power supply to homes and industries as well as an efficient and affordable public transport system in Nigeria, Nigerians have come to rely on petrol powered source of alternative power and general logistics for their daily economic activities.
Any increase in the price of what is undoubtedly Nigeria’s economic lifewire is bound to have a hydra-headed effect of increase in prices of goods and services across board as a consequence of cost push inflation.
For every kobo that is added to price of petrol, Nigerians are further pushed into deprivation, want and hunger because the resultant cost push inflation erodes whatever is left of their purchasing power and pushes down more people below the poverty line. Therefore Nigerians have over the years resisted increases in the price of the most important source of their socio-economic sustenance.
The highpoint of this collective resistance of the Nigerian people against the injurious neo-liberal policies of the PDP in the oil and gas industry was in 2012, when the Goodluck Jonathan administration attempted to remove subsidy on refined petrol, which resulted into a hike in price from 65 naira to 129 naira. The then opposition coalition and current ruling party along with their Civil Society Organizations partners in progress, mobilized Nigerians to occupy the streets of Lagos and Abuja in protest of the removal of subsidies and increase in price of petrol by the Goodluck Jonathan administration. In bowing to the wishes of the Nigerian people, the Goodluck Jonathan administration restored subsidies on petrol and in exchange for a marginal increase from 65 naira to 97 naira.
President Buhari who made a huge political gain out of the subsidy removal misadventure of the Goodluck Jonathan administration in 2012, chided his predecessor for inflicting hardship on Nigerians through a non-existent fraudulent subsidy regime and promised to revamp Nigeria’s moribund refineries and make petrol available at lower prices for the Nigerian people.
In reaction to the attempt to remove fuel subsidies in 2012 by the Goodluck Jonathan administration, former opposition spokesman and current government information minister Lai Mohammed, roundly rejected the move as not being in the interest of Nigerians and charged the government of the day to fix the existing refineries and build new ones before contemplating ‘’fuel subsidy removal, if at all there is a subsidy’’.
And believing him to be a man of integrity with a pedigree of being part of the golden age of Nigeria’s oil and gas industry, having served as petroleum minister between 1977 and 1978, majority of Nigerians that were frustrated with the PDP led federal government’s inability to provide energy security for them voted in President Buhari of the opposing APC in 2015, to bring back the good old days of Nigeria’s oil and gas industry.
However, in what has become a familiar pattern of broken promises that are consistent with his character of dishonest integrity, President Buhari without fulfilling his promise of revamping Nigeria’s refineries, shocked Nigerians when he unilaterally removed subsidies from petrol, which sent the prices up from 85 naira to 145 naira within one year of his first term in 2016; the highest marginal increase in the history of the 4th republic.
Within a brief period of one year, President Buhari succeeded in shoving down the throat of Nigerians the bitter pills of the very neo-liberal oil and gas policies they loathed so much and resisted with their very lives for sixteen years. The recent upward review of prices of petrol from 145 naira to 162 naira, which is a direct consequence of President Buhari’s deregulation and removal of subsidy policy, reads like a tragic plot from the PDP Neo-liberal economic doomsday play book.
In the five years of the Buhari administration, Nigeria’s refineries have gone from moribund to billions of naira loss grossing comatose carcases thereby aggravating the festering problem of energy insecurity. And this problem can only be solved by rehabilitating Nigeria’s existing refineries to perform to their full installed capacities and build new ones to expand local refining capacity to a level that meets domestic consumption demands.
The responsibility of boosting local refining capabilities is not one the government of Nigeria can leave for the private sector alone. To do that will amount to government’s abdication of its constitutional duty of providing energy security for its citizens to profiteering private entities.
Without heeding its own advice of 2012 of rehabilitating existing refineries and building new ones, President Buhari’s deregulation move is a deregulation of the continuous importation of refined petroleum products into Nigeria that will perpetually subject the energy security of Nigerians to the mercy of local oil marketing cartels acting at the behest of international market forces of demand and supply.
Contrary to the assertions by some neo-liberal pundits, subsidizing petrol, which is the livefire of Nigeria’s economy, is not subsidizing consumption but actually subsidizing production.
Every serious country in the world including the United States, China, Canada and Saudi Arabia spends billions of dollars in subsidies for oil and gas production in their respective countries for the purposes of energy security for their citizens under a social economic framework where deregulation and subsidies are not mutually exclusive.
By making already impoverished Nigerians to bear the financial burden of his acute failure of leadership, President Buhari’s change of promise from revamping Nigeria’s moribund refineries and construction of new ones to achieve self-sufficiency in refined products to continuous importation of petrol at prices to be determined by international market forces, is a betrayal of the trust of millions of Nigerian working class, urban and rural poor masses who defied all odds to vote out the PDP and vote him into power.